web analytics
October 21, 2014 / 27 Tishri, 5775
At a Glance
Blogs
Sponsored Post
Meir Panim with Soldiers 5774 Roundup: Year of Relief and Service for Israel’s Needy

Meir Panim implements programs that serve Israel’s neediest populations with respect and dignity. Meir Panim also coordinated care packages for families in the South during the Gaza War.



The Secret to Buying the Right Stocks

Goldstein

What kind of investor do you think you are? Do you try to time the market and jump in at the right minute? Or are you a more cautious kind of person who spends hours researching market performance before you consider buying or selling anything?

In fact, it doesn’t really matter what kind of investor you think you are. The results of your efforts are translated into the profits and losses that appear in your portfolio. Therefore, even if you feel very confident and have a great feeling about a particular stock that everyone’s talking about, when push comes to shove, your emotions make very little difference. Actual market performance is, at the end of the day, what counts.

For many years, investors have always wanted to know what the true secret is to buying the right stocks. From the South Sea Bubble to the Great Depression, there are those who fell by the wayside when everything went wrong, while on the other hand, there were those who made the right moves and ended up living in luxury. So, what is it that helps some people get it right, while others don’t? Is there any real basis for investing by following your gut feelings? And, if the famous disclaimer, “past performance is no indication of future returns,” is actually true, what is the point of all of the research out there into markets, stocks, performance, etc. anyway? Perhaps the whole thing is one great gamble.

These questions, of why people invest the way they do, have occupied researchers in recent years, giving rise to the science of behavioral investing. One such researcher, Professor Terrance Odean of the University of California (Berkeley), studied the behavior of investors and reached the conclusion that “the average investor is his own worst enemy.”

According to Professor Odean, “the average investor is better off not trying to time the market.” From his research, he has found that individuals tend to get market timing and behavior wrong more often than institutional investors. There can be many reasons for this. For example, an individual is more likely to be driven by emotions such as fear or regret, whereas an institution is less likely to be driven by emotion. Secondly, as Professor Odean points out, “there are times when institutional investors know things that individuals don’t know, so they have an informational advantage or ability to process publicly available information in a better way.”

Based on Professor Odean’s research, the most efficient way to buy stocks may be to use the services of a money manager. Professional money managers hopefully won’t be blinded by emotion when making investment decisions (after all it’s their job!) and have more access to the right information than the average investor.

If you want to find out more about the theories of behavioral investing, watch a video of my interview with Professor Odean, which took place on the Goldstein on Gelt radio show.

About the Author: Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd, a financial planning and investment services firm located in Jerusalem. He specializes in working with clients who live outside of the United States and want to maintain a U.S. brokerage account. Doug’s newest book, co-authored with Susan Polgar, about how using chess strategies to improve your finances, Rich As A King can be purchased at www.richasaking.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, SIFMA, FSI. Accounts held at Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. Neither Profile nor PRG gives tax or legal advice. Before immigrating to Israel, it is advisable to consult with a tax attorney who is knowledgeable about Israeli law. Contact at doug@profile-financial.com


If you don't see your comment after publishing it, refresh the page.

Our comments section is intended for meaningful responses and debates in a civilized manner. We ask that you respect the fact that we are a religious Jewish website and avoid inappropriate language at all cost.

If you promote any foreign religions, gods or messiahs, lies about Israel, anti-Semitism, or advocate violence (except against terrorists), your permission to comment may be revoked.

No Responses to “The Secret to Buying the Right Stocks”

Comments are closed.

SocialTwist Tell-a-Friend

Current Top Story
Facebook post from man believed to be Canadian convert to Islam who rammed soldiers with his car in possible terrorist attack, Oct. 20, 2014.
‘Radicalized’ Convert to Islam Attempted to Murder Canadian Soldiers [video]
Latest Blogs Stories
256px-Israel-Palestine_flags.svg

Polls indicate that the Palestinians are much more against a two state solution than the Israelis.

Doug Goldstein

Has the Jewish world adapted to the times? Hear the answer with Doug and his guest, Rabbi Berel Wein.

NY rally against Met Opera's 'Death of Klinghoffer' opera. Sept. 22, 2014.

Leon Klinghoffer’s daughters: “‘Klinghoffer’ is justified as ‘a work of art’…This is an outrage.”

eg

Kids bring in the light and let out the darkness through breathing exercises; it changes people.

If I make a million dollars in 2 weeks, how can I observe something like this and sit by quietly?”

Sometimes collective action against the heinous acts of the majority is not enough. The world should not only support the blockade of Gaza; it must enforce the dismantling of Hamas.

How long will it take for Israel and the Jewish World to admit that we are in very serious danger?

How do changes in technology affect the human life and our interactions with each other?

Palestinians (and Jordanians) often use the term “provocation” regarding Israeli action in Jerusalem

The zealots who engineered the ban have been publicly disgraced.

I am sick and tired of this one way street boycott! Time to boycott all products developed or invented in the Palestinian controlled areas! Let’s start with……umm….

Such an incredible miracle to have Israel, it’s crazy that every Jew isn’t clamoring to live here!

Driving is cultural. I come from a place with incredibly polite and safe drivers, unlike Israel.

My difficulties persisted until I met a beggar outside a restaurant after Tisha B’Av 12 years ago.

I’m more worried about the dangers of the Palestine virus than the Ebola one.

“Nonsense” seems to be the New York Times sense of balanced and accurate coverage.

More Articles from Doug Goldstein, CFP®
Doug Goldstein

Has the Jewish world adapted to the times? Hear the answer with Doug and his guest, Rabbi Berel Wein.

Doug Goldstein

How do changes in technology affect the human life and our interactions with each other?

Discover the connection between hypnotism and investing on this week’s show.

Discover the motivations and the emotions that may affect investing.

Grandmaster Michael Adams talks about life as a professional chess player.

Why some countries are more economically successful than others? Tune in for the answer…

Why is an IRA a worthwhile account for retirement? And how can you use it to the best advantage?

How do you reach the top of your profession, and are you always aware of your own talents?

Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/the-secret-to-buying-the-right-stocks/2012/07/04/

Scan this QR code to visit this page online: